‘Indian Stock Market Volatility’: A Study of Inter-linkages and Spillover Effects

2019 ◽  
Vol 18 (2_suppl) ◽  
pp. S183-S212 ◽  
Author(s):  
Suparna Nandy (Pal) ◽  
Arup Kr. Chattopadhyay
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Causality Test ◽  
Asymmetric Volatility ◽  
Indian Stock Market ◽  
Domestic Stock

The article attempts to examine interdependence between Indian stock market and other domestic financial markets, namely, foreign exchange market, bullion market, money market, and also Foreign Institutional Investor (FII) trade and foreign stock markets comprising one regional stock market represented by Nikkei of Japan and other stock market for the rest of the world represented by Standard & Poor’s (S&P) 500 of the USA. Attempts are also made to examine asymmetric volatility spillover, first, between the Indian stock market and other domestic financial markets and second, between the Indian stock market and global stock markets (represented by Nikkei and S&P 500) along with the foreign exchange market. To measure linear interdependence among multiple time series of financial markets multivariate Vector Autoregression (VAR) analysis, Granger causality test, impulse response function and variance decomposition techniques are used. For estima-ting the volatility spillover among the aforesaid markets Dynamic Conditional Correlation-Multivriate-Threshold Autoregressive Condi-tional Heteroscedastic (DCC-MV-TARCH) (1, 1) model is applied on daily data for a quite long period of time from 01 April 1996 to 31 March 2012. The results of multi­variate VAR analysis, Granger causality test, variance decomposition analysis and impulse response function estimation establish significant interdependence between domestic stock market and different other financial markets in India and abroad. The results of DCC-MV-TARCH (1, 1) model estimation further show signi- ficant asymmetric volatility spillover between the domestic stock market and the foreign exchange market and also from the domestic stock market to bullion market and changes in gross volume of FII trade. We also find (a) both way asymmetric volatility spillover between the domestic stock market and the Asian stock market and (b) its unidirectional movement from the world stock market to the domestic stock market. The results of the study may help market regulators in setting regulatory policies considering the inter-linkages and pattern of volatility spillovers across different financial markets. JEL Classification: G15, G17

Asymmetric Volatility Spillover between Stock Market and Foreign Exchange Market: Instances from Indian Market from Pre-, during and Post- Subprime Crisis Periods

2018 ◽  
Vol 19 (6) ◽  
pp. 1567-1579 ◽  
Author(s):  
Gnyana Ranjan Bal ◽  
Amit Manglani ◽  
Malabika Deo
Keyword(s):  
Stock Market ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Spillover Effect ◽  
Subprime Crisis ◽  
Volatility Spillover ◽  
Asymmetric Volatility ◽  
Optimal Portfolio Selection ◽  
Indian Stock Market

Modern businesses are so inter-twined that a cause in one market affects other markets throughout the Globe. The 2008 subprime crisis is one of such evidences of inter-linkage of global markets. Such type of event motivates many studies to analyse the transmission of volatility from one market to another market. The study aims to analyse the volatility spillover effect between CNX Nifty and exchange rates covering for three different currencies, that is, USD, GBP and yen. GARCH (1,1) and EGARCH (1,1) have been used to identify the spillover effect and asymmetries or leverage effect in the volatility transmission through the estimation of different parameters. The overall findings show that there is spillover between the foreign exchange and the stock market. Among the three exchange rates, the USDR is strongly co-related with the Indian stock market as compared to other rates. Our study will significantly contribute to the existing literature in this context. The findings of the study have greater implications especially for hedgers, arbitrators and other participants in this market. As such type of information regarding transmission of volatility can help them to diversify their overseas risk through an optimal portfolio selection.

Examining Volatility Spillover Between Foreign Exchange Markets and Stock Markets of Countries such as BRICS Countries

2021 ◽  
pp. 097215092110205
Author(s):  
Dharmendra Singh ◽  
M. Theivanayaki ◽  
M. Ganeshwari
Keyword(s):  
South Africa ◽  
Stock Market ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Markets ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Currency Market ◽  
Brics Countries ◽  
Exchange Markets

The objective of this article is to examine the volatility spillover effect between the foreign exchange market and the stock market of Brazil, Russia, India, China and South Africa (BRICS) countries along with Japan as the developed country in the region, affecting the BRICS countries. Generalized Autoregressive Conditionally Heteroscedastic (GARCH) (1,1) method is used to study the volatility between the stock market and the foreign exchange market in selected countries, and asymmetric model, that is, Exponential Generalized Autoregressive Conditional Heteroscedasticity—EGARCH (1,1) is also used to investigate the presence of leverage effects in both stock market and foreign exchange market in selected countries. GARCH findings suggest a two-way volatility spillover between the stock market and foreign exchange markets for India, China and South Africa. In BRICS countries, volatility spillover from the currency market to the stock market is seen as more evident and robust as compared to spillover from the stock market to the currency market. A positive asymmetry in spillover is also observed from the foreign exchange market to the stock market. The findings of the study may provide valuable information to investors for decision-making in international portfolio investment and also for economic policymakers for their financial stability perspective.

scholarly journals THE EFFECTS OF VOLATILITY SPILLOVER ON THE LARGEST GLOBAL FINANCIAL MARKET SEGMENTS

2019 ◽  
pp. 319
Author(s):  
Irena Janković
Keyword(s):  
Stock Market ◽  
Foreign Exchange ◽  
Financial Market ◽  
Foreign Exchange Market ◽  
Bond Market ◽  
Volatility Spillover ◽  
Exchange Market ◽  
Market Segments

The aim of the paper is to present and analyse indicators of financial connectedness and volatility spillover on important segments of the global financial market – the stock market, bond market, CDS market, and foreign exchange market. Total, net, and directional measures of volatility spillover are presented and analysed, indicating the level of connectedness of countries’ particular market segments and the level of volatility spillover in periods of crisis and stability.

Global markets as global conversations

2007 ◽  
Vol 27 (5-6) ◽  
Author(s):  
Karin Knorr Cetina
Keyword(s):  
Financial Markets ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Global Market ◽  
Global Markets ◽  
Economic Aspects ◽  
Exchange Market ◽  
Conversational Interaction ◽  
Interaction System ◽  
Streaming Flow

AbstractFinancial markets are one of the most iconic and influential structures of our time. The foreign exchange market in particular is also the most genuinely global market—and the largest market worldwide, with an average daily turnover of 1.8 trillion US dollars. The foreign exchange market is also structurally like a massive conversational interaction system; many of its transactions are conducted through electronically mediated ‘conversations’. Transactions not conducted through conversations but through an electronic broker also display a sequential turn-taking structure. In this paper, I analyze the streaming ‘flow’ architecture of this market in terms of its sequential structures and their technological and economic aspects. I also specify and analyze several types of texted sequences that articulate and illustrate the response-based interaction system of this market. I argue that informational sequences are particularly important; the informational liquidity of this market sustains and supports the market's economic liquidity.

Volatility Spillover Between Indian and MINT Stock Exchanges: Portfolio Diversification Implication

2019 ◽  
Vol 67 (3-4) ◽  
pp. 299-311
Author(s):  
Miklesh Prasad Yadav ◽  
Asheesh Pandey
Keyword(s):  
Stock Market ◽  
Spillover Effect ◽  
Stock Exchanges ◽  
Volatility Spillover ◽  
Conditional Correlation ◽  
Causality Test ◽  
Portfolio Managers ◽  
Vector Auto Regression ◽  
Indian Stock Market ◽  
Auto Regression

We examine the spillover effect from the Indian stock market to Mexico, Indonesia, Nigeria and Turkey (MINT) stock markets in order to check if suitable diversification opportunities are available to global portfolio managers investing in India. We apply Granger causality test, vector auto-regression (VAR) and dynamic conditional correlation (DCC)–MGARCH to investigate the level of integration between India and MINT economies. We observe bidirectional causality between India and Nigeria, unidirectional causality in Mexico and Indonesia, while no causality is found between India and Turkey. Our VAR results suggest that none of the MINT economies impact the return of the Indian stock market; rather returns of the Indian stock market are more affected by their own lagged values. Finally, by applying DCC–MGARCH, we observe that there is no volatility spillover from India to any of the MINT economies. We recommend that portfolio managers investing in the Indian economy may explore MINT economies as possible destinations to diversify their risk. Our study has implications for both academia and portfolio managers.

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